Thank you very much for coming to the 2022 Morgan Stanley Healthcare Conference. My name is Ryuk Byun. I'm an executive director in the healthcare investment banking group. Before we get started, I have a research disclosure that I need to read. For important disclosures, please see the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. Today, we have the pleasure of hosting Kezar. We have Chris Kirk, who is kind enough to, you know, join us for the fireside chat. Maybe, Chris, before we get started, you can tell us a little bit about your background, and also tell us about the Kezar story and how you got started.
Yeah, sure. First of all, thanks for the invitation to come join y'all. I love talking about the Kezar story, as I'm one of the founders of the company. My background is tumor biology and immunology, and I was a fortunate young scientist to be involved in the discovery and development of carfilzomib, or KYPROLIS, proteasome inhibitor used in multiple myeloma. Through research that my team and I conducted, we also learned that generating selective inhibitors of a distinct form of the proteasome, called the immunoproteasome, could have potential as therapeutics for autoimmune and immune-mediated disorders.
Post the Onyx acquisition by Amgen way back in 2013, I started to set out to start a company based on immunoproteasome biology, and partnered with my longtime friend and serial entrepreneur, John Fowler, along with a longtime collaborator, Jack Taunton, at UCSF. He's the science behind Principia, and Global Blood, and more, most recently, Terremoto. We started Kezar, received our funding and licensing of IP from Amgen in 2015, and here we are a little more than seven years later, just under 80 employees, two molecules in the clinic, some compelling phase II data. We're in a really exciting place. I couldn't be prouder of the progress the company has made, where, you know, I serve as Chief Scientific Officer, President, and a member of the board.
Great. Thank you. Maybe we should just dive right into and talk a little bit about your trial and the data that you've been able to demonstrate. On MISSION phase II in lupus nephritis, you've demonstrated quite a robust response rate, both from an ORR and UPCR reduction standpoint, as well as complete renal response with UPCR below 0.5. Can you tell us a little bit about how this data compares to other phase III studies that we've seen, such as voclosporin and BENLYSTA?
Sure. First I might start with a little bit of a background on zetomipzomib, just because many people may not be familiar with this unique mechanism of action. The immunoproteasome is a form of proteasome found in our immune effector cells, and we and others have learned over the last decade or so that selective inhibition of the immunoproteasome modulates a wide range of pathogenic inflammatory processes. What I mean by that is, by inhibiting the immunoproteasome, we block acute cytokine production by dendritic cells and macrophages, cytokines like IL-23, TNF-alpha, GM-CSF. We modulate T cell responses, turning up Tregs, turning down Th1 and Th17 cells. We have multiple effects in B cell biology, resulting in a reduction of autoantibodies and plasma cell activity.
We felt like going after diseases that are heterogeneous in their molecular etiology would be a good place for an agent like zetomipzomib. We embarked first on a phase I-B portion of the MISSION study in patients with non-renal lupus, in which we saw excellent safety and tolerability and a lot of biomarker signs of clinical activity in these patients, and we actually had two patients who had very tough to treat lupus nephritis who saw excellent response there with a greater than 50% reduction in their UPCR. That led to an open label phase II study in patients with LN. We enrolled 21 patients to this trial, and there's some unique features to this trial relative to other recently approved agents like voclosporin and BENLYSTA in this space.
Those agents tie themselves to induction therapy, and it's called that because patients start on high-dose intravenous corticosteroids and then go to a high-dose oral steroid and try to taper themselves off. This is very hard on the patient. Just the steroid burden alone, let alone the immunosuppressive agent they're also taking. These agents of course provide a benefit over that induction therapy by itself, but it still leaves a lot of patients lacking in terms of an adequate response. We chose MISSION to be a trial in which we would enroll patients who had been being treated for their lupus nephritis, in some cases already received induction therapy, and weren't doing well on that therapy.
They had to stay on a stable background medication, and their steroid load dose was fairly low, and the physicians were encouraged to taper it further. We gave zeto once a week for 24 weeks, and then at weeks 25 and 29, we looked for renal response. We found that at week 25, the primary endpoint time point, we saw greater than 68% of patients with a 50% reduction in their UPCR. That's a sign their kidneys are getting better. Of those patients, six of them also had what's called a complete renal response. Their UPCR got to below 0.5, and their daily steroid dose got below 10 mg of prednisone. Complete renal responses are associated with better long-term outcomes in LN and a reduced risk of getting end-stage renal disease.
This is a meaningful improvement for these patients. By week 29, all but one of the 17 patients at that time point had achieved at least a 50% reduction in their UPCR. This definitely exceeded our expectations in terms of a response to zeto. To be able to accomplish these numbers, 35% CRRs and greater than 90% overall response, without the need for induction therapy in these patients really marks it in stark contrast to agents that require this high-dose corticosteroid induction therapy.
Got it. I think we would love to spend a little bit more time on induction therapy.
Mm-hmm.
Because I think that's, as folks kind of, you know, look at the Kezar story, that's kind of, you know, and they're trying to maybe do a little bit of benchmarking on their own. That's kind of trying to make things more apples to apples.
Yeah.
Is something that they're kind of trying to do. The patients that you have enrolled in your lupus nephritis trial, they're not receiving induction therapy. Like, how would you characterize the baseline characteristics of those patients?
Yeah. We had a pretty wide range of-
Mm-hmm.
LN patients in terms of the number of years they've been dealing with this disease, from newly diagnosed LN patients to those that had been dealing with the disease for 16+ years. A wide range of those on their journey as patients. In addition, some had received induction therapy in the past. Others had received biologic therapy, but all of them were taking what was an acceptable amount of immunosuppressive agent, as mostly mycophenolate, and some level of daily steroid use. It was satisfactory enough for daily living, but it was not improving their kidney function because their UPCR was greater than one at their baseline. These were best described as either inadequately treated patients or sort of long-term non-responding patients.
Without that use of induction therapy, that really walloping bolus of steroids to kickstart an anti-inflammatory response, these patients wouldn't have been expected to do very well. The addition of zetomipzomib on top of their baseline medications really, we believe, is what's driving the response. It does make it hard to compare to benchmark phase III trials with agents like voclosporin or BENLYSTA. It's worth noting that those agents, at best resulted in somewhere between 35% and 40% CR rate with the addition of that induction therapy and the targeted agent.
If you were to, I guess, just digging into that a little bit more, how would you handicap kind of the standalone effect that induction therapy alone would have had in your patients and trying to isolate the benefit of zeto versus induction therapy?
Yeah. That's a somewhat challenging question to answer, in large part because some of the patients had already received induction therapy in the past, and you would not expect them to have a good response, again, given that they're entering in with elevated UPCRs, and some of the patients hadn't yet gone through that round of therapy. For most LN patients, if you get high-dose corticosteroids and MMF-based induction therapy, you can expect after six months to one year of treatment, approximately 20% of the patients to achieve a complete renal response, again, the outcome associated with long-term clinical benefit, and about 50% of the patients who would have at least a partial response or a 50% reduction in their UPCR.
Again, contrasting that to the 35% number we saw and the 94% overall response.
Great. Thank you. You touched on reduction in prednisone use.
Mm-hmm.
How significant is that? In these other trials of voclosporin or BENLYSTA, is that something other folks have reported or been able to achieve?
Steroid reduction is a goal in the treatment, not only in lupus nephritis, but in lupus in general by rheumatologists and their treating physicians. Long-term corticosteroid use, of course, associated with many morbidities that are a challenge for the patient and the healthcare system. In the phase III trials for voclosporin and BENLYSTA, there were mandated steroid tapers. Per protocol, the physician had to do their best to reduce that daily steroid burden so that they could account for the complete renal response. Because we were running an exploratory phase II study, we didn't feel it was right to mandate a steroid taper for the physicians to follow.
Instead, we encouraged it, and we found sort of two groups of physicians, some who did taper their steroids because they felt it was in the best interest of their patients, others who maintained the steroid dose stable through the entirety of the study, in essence to keep the integrity of the study in their mind going. That is isolating the treatment effect to zeto. The problem is if you don't reduce that steroid dose below 10, even if the UPCR is below 0.5, you can't count that patient as a complete renal response. Indeed, our median UPCR by week 29 was less than 0.5. That meant more than half of the patients had gotten into the renal category of a complete renal response. Because we didn't mandate the steroid taper, it.
Their daily dose wasn't brought down. We don't think their response was due to their standard steroid dose. Instead, we think that this is a sign that, again, mandating steroid tapers, as has been done in the phase IIIs, is probably the best way to go for future trials and something we'll do in our next phase study.
Great. Thank you. I mean, the data set that you provided is, you know, very interesting and, you know, one of the couple reasons why at least I'm very excited is, you know, you've also seen significant biomarker improvements, so maybe could you comment a little bit?
Yeah, happy to share, I'd like to do that sort of in the totality of the lupus program for zeto, if you don't mind. In the MISSION phase I-B, we had eight subjects who entered with measurable levels of anti-double-stranded DNA antibodies. These are autoantibodies that are associated with long-term bad outcomes in lupus patients. Within three months of treatment, all eight patients had shown some form of reduction in their autoantibody level, and that maintained or improved during the three-week non-dosing follow-up period. In addition, we had a lupus nephritis patient who was treated in the phase I-B and then flared and was retreated under a single patient IND at Ohio State University, and we presented her data back in November.
Her autoantibody levels had come back up during her time off of zeto for about a year and when she flared. Once she went back onto zeto, she was able to completely reduce her steroid dose down to zero, her background immunosuppressive agents, except for hydroxychloroquine, and her autoantibody levels went to zero by the end. We were very excited about that. Most recently, in the MISSION phase II, we had 12 subjects who came in with anti-double stranded DNA antibodies. Five of them completely resolved their autoantibody levels, again going below limits of detection, which is a very, very encouraging biomarker sign. In addition, lupus patients come in with low complement, either C3 or C4, and we've seen normalization of complement levels in more than 50% of our patients treated with zeto.
Great. Maybe as an extension to that, can you touch on some of the benefit you've seen in your patients in terms of extrarenal symptoms? In other LN trials, whether it's voclosporin or BENLYSTA, what kind of improvements have they seen in some of these extrarenal lupus symptoms?
Yeah. Let's start first with the drugs that are currently now approved in LN, BENLYSTA and voclosporin. Voclosporin added on top of induction-based therapy has no improvement on the extrarenal manifestations of disease as measured by the SLEDAI scoring system, which is the sort of gold standard scoring system for extrarenal manifestations of disease. BENLYSTA is of course approved in the treatment of non-renal lupus. That's where it achieved its first approval back in 2011, and it showed on average, I believe of 63% of patients showed at least a four-point drop in their SLEDAI score, predominantly mediated by serologic markers, so the biomarkers that I was just talking about, anti-double stranded DNA antibodies and complement levels.
We had already seen very encouraging signs of extrarenal activity for zeto in the phase I-B, which was only three months of treatment, where we saw on average a four-point drop in SLEDAI scores in patients. Now, we didn't have a placebo control in that part of the study, so it's hard to compare to, but we're very encouraged by it. In addition, within the LN data, patients treated in the MISSION phase II, we saw on average almost a five-point drop in SLEDAI scores, improvements in both the physician and the patient's global assessment of their disease, two important parameters in lupus trials, as well as other organ-specific scoring systems such as joint count and what's called the CLASI-A score, which measures the rash in mucocutaneous disease.
Overall, we are very encouraged that zeto is a broad-acting agent in patients with lupus and lupus nephritis, not just focused on improving kidney function.
Got it. Thank you. Just a few more questions on zeto-
Sure.
The LN trial. I think UPCR benefit was observed quite early with zeto, and the response seems to have deepened over time. Where or when would you expect the response to reach a plateau?
We designed the MISSION phase II study to have a 12-week non-dosing follow-up period where the patients had to maintain a stable background medicine, save for any tapering of their steroids that the physician would like to do. We designed that because in the phase I-B, we saw what we call a tail effect, which is durable anti-inflammatory responses or biomarker responses seen months after the last dose of zeto. We're very excited to see what the follow-up data, which we haven't yet presented, will show us. It may teach us that the responses in LN patients are indeed very durable, and can be seen out to three months after the last dose.
We may find that subsets of patients start to show relapse, and we may look for biomarkers from their baseline samples to see if we can find something that predicts for that relapse off of zeto. Either way, it will teach us a lot about the durability of the response and possibly down the road, the ability to generate maintenance therapy schedules for zeto that don't require the weekly administration.
Great. Thank you. Maybe stepping back a little bit, you know, can you talk a little bit about what, you know, with zeto in particular, what makes lupus nephritis a better indication versus, DM and, PM, based on what you have seen? What were some of the learnings that you can use from that experience to think about the potential indication expansion?
Sure. You know, we've always believed zeto is a pipeline-in-a-drug based on that very broad, immunomodulatory mechanism. We invested heavily in multiple clinical indications very early on in the zeto development program. We had a lot of conviction, of course, around lupus nephritis, and it seems to be paying off. We had equal scientific conviction for myositis. We had animal model data. We had quite a bit of experimental data from others that suggested that the immunoproteasome plays a role in this disease. We worked with the key investigators who developed and currently use a scoring system called the TIS, which is a composite scoring system that has a number of subjective measures in it, to design a trial to get us proof of concept in a rapid period of time.
Unfortunately, at the end of this trial, which was a double-blind placebo-controlled crossover study, there was no separation from placebo in either the patient population in total or the subsets of DM and PM who were enrolled. We're not quite sure yet whether that lack of separation is due to the scoring system itself and its subjective measures relative to lupus nephritis, where we have a quantitative measure of UPCR. We don't know whether it's due to the duration of treatment, 16 weeks versus the 24 weeks in the MISSION study. We don't know whether it's due to the small sample size and the mix of both DM and PM patients. We've got a lot still to learn.
I will say that despite that lack of strong signal, patients chose to enroll into the open label extension, which enabled them to receive zeto for up to two years. The enrollment rate to that was very high, and the retention rate has been extremely high, with most patients only coming off because their two-year time point is over. They're reporting that they're feeling better. They're willing to put through the participatory burden of sometimes going to the clinic once a week to receive their injections and monthly visits for disease efficacy. They must be feeling like they're getting a drug effect. Now we have to learn from that and solve for the disconnection with the scoring system used and the data we generated.
Right
In the trial.
Yeah. Any one of us that's been to medical school knows how challenging it is to diagnose myositis and how subjective it is.
Mm-hmm.
But that's really helpful. Thank you. Now one more question on zeto, which is, you know, what's next?
We're still finishing cleaning up the data from the final time points in the MISSION study. We hope to present those data by year's end at one or more major medical conferences that work for rheumatology or nephrology. In addition, we will be announcing by year's end the initiation of a clinical trial of zeto in another indication outside of LN. That indication will be likely an orphan one, and based on our learnings from the PRESIDIO study, one that has an objective endpoint and quantifiable endpoint for that. I'd like to be able to tell you what design we have for our next stage study, which we think will be part or all of a registration package for zeto in LN.
We want first to be able to talk to the FDA about that trial design and get feedback from them. The MISSION data opens up an interesting possibility that we don't need to marry ourselves to standard induction therapy and get approval in LN, but we need regulatory feedback before we can announce what that trial design is. That next study will be large, randomized, and again, either part or all of a registration package for zeto and LN.
Great. Tell us a little bit about 261.
Yeah. I'm equally excited about the protein secretion pathway. First, a little bit of esoteric biology since this, as far as we know, no one else is targeting this intrinsic pathway and found in all of our cells. About a third of our genome encodes for proteins whose destined location is either on the cell surface or outside of the cell. Think of cytokines like IL-2 or IL-17, or receptors like PD-1 and CD47. All of these proteins have to transit into the endoplasmic reticulum first, be properly folded and packaged, and then they can make their way out through the protein secretion pathway. The starting point of that pathway is on the membrane of the endoplasmic reticulum. It's a channel protein complex called the Sec61 translocon.
Many of you probably haven't thought about that since your freshman year biology class. Mother Nature has done some wonderful things. She's created a wonderful set of diversity at the gene level, meaning the signal peptides that Sec61 recognizes on those target proteins are all different from each other, and therefore, all tractable from a chemical standpoint. We generated KZR-261 to hit a large subset of mostly secreted and what are called type I transmembrane proteins. We were surprised but encouraged to find that it has stronger effects on Sec61 function in tumor cells versus non-transformed cells. It has extremely broad anticancer activity in both solid and liquid tumors. We've screened it in almost 500 cell lines. We've used that information along with xenograft data and patient-derived xenograft data to guide us towards tumor types that are likely to be sensitive to 261.
This includes prostate cancer, colorectal, mesothelioma, and melanoma. We've kicked off a phase I study currently in the dose escalation phase in solid tumors. It will eventually transition into expansion arms in those tumor types, as well as another all-comers arm, for which we will be taking biopsies to help us guide in future tumor type selections. In addition, KZR-261 has some pretty profound immunomodulatory effects. In mouse models of tumors that have a competent immune system, we see enhancement of activated T cells and dendritic cells within the tumors and reduction in regulatory T cells in those same tumors that we're excited about. This is both a direct anti-cancer agent, but also a microenvironment modulating one as well.
Great. Chris, anything else you wish to tell the world about Kezar that we haven't already talked about today?
Yeah. A couple of points to touch on. First, behind 261 is an extremely robust discovery platform around the Sec61 translocon. By generating 261, we learn that we can safely and potently inhibit the protein secretion pathway in ways that go after some very key targets. That's led us to try to make selective inhibitors of protein secretion. These would be small molecule replacements to biologic therapy. Think of an oral anti-PD-1 or an oral anti-CD47. In fact, we have the ability to do that not only in isolation, but in combination as well. You could think of multivalent protein secretion inhibitors in the same way you can think about bi- and tri-specific antibodies, but with small molecule properties that are more drug-like and allow for oral bioavailability and tissue penetration.
I would look to SITC to see an update later this year on that program. We're very excited about the data that we've been generating. In addition, we've been able to keep the cash balance at Kezar in quite a good place, $307 million in cash as of last reporting. That gives us a runway through 2025, which enables us to kick off this next large study in LN, a study of zeto and an additional autoimmune indication, plus the robust KZR-261 phase I study in solid tumors. I think we're well-positioned for future growth and future value inflection.
Well, Chris, it's so refreshing to talk to a company that is doing something so novel in the field of immunology and also been able to generate clinical efficacy and superiority. We're very excited to have hosted you. Thank you very much for your time, and hope you have a good rest of the conference.
Thank you for your time. Yeah.